After two consecutive trading days, the share price of Shenzhen Huada Zhizao Technology Co., Ltd. (hereinafter referred to as "Huada Zhizao", 688114.SH), a leader in the field of domestic gene sequencing equipment, stabilized. As of the close of trading on January 30, Huada Zhizao's share price was 66.85 yuan per share, down 0.70 per cent, and was stronger that morning. In the past three trading days, the company's share price has fallen by nearly 20%.

On the news side, the draft version of the U.S. Biosafety Act, which has been circulating since January 26, has stirred up the-share biomedical sector. The Pharmaceutical Department has led the decline in A- shares and Hong Kong stocks. Huada Zhizao and its brother company Huada Gene (300676.SZ) also continued to fall.

The above-mentioned bill targets so-called "foreign rival biotech companies" and prohibits the use of federal funds for such companies. Huada Group (including Huada Zhizao and its US subsidiary Complete Genomics) is mentioned. Once passed, the bill would prohibit federally funded health care providers from using products made or services provided by so-called "worrisome foreign rival biotech companies," according to the proposal.

Huada Zhizao quickly issued a clarification announcement on January 26. The announcement stated that it was informed that Huada Zhizao was mentioned in a draft BIOSECURE Act (hereinafter referred to as the "draft") recently proposed by the United States. The company noted that the draft is still in the proposal stage, and there are many factual errors in the company's allegations, which may be revised or terminated in the future, and there is still great uncertainty about whether the law can be formed.

Huada Zhizao said that since its establishment, the company has been adhering to the concept of "innovation and intelligence leading life science and technology" and is committed to becoming a "creator of core tools for life science and technology". Through deepening platform application, customers can achieve more innovative breakthroughs in "reading, writing and saving" and expansion of application scenarios.

The announcement particularly emphasizes that in the development process, the company strictly abides by the laws and regulations of the operating market, and pays great attention to data security and privacy protection. "As an upstream equipment provider in the gene sequencing industry, the company's business links do not involve data collection behavior, and the data generated by customers based on the company's sequencing platform are collected, stored, processed and controlled by the customers themselves."

The company also stated that it will continue to pay attention to the development of the incident and promptly evaluate and verify the impact of the incident on the company.

BGI mainly focuses on the gene sequencer known as the "heavy weapon of the country. The company was established in April 2016 and was independently split from the original sequencer plate of Huada Group. This sector originated in 2013, when Huada acquired Complete Genomics Company of the United States to obtain core patented technology, and then set up a sequencer research and development team to implement domestic technology transformation. It has now developed into one of the three companies in the world that can independently develop and produce clinical high-throughput gene sequencers. In September 2022, Huada Zhizao was listed on the SSE.

Huada Zhizao's current business is mainly divided into gene sequencer business segment, laboratory automation business segment, and new business segment. In the first three quarters of last year, the company's operating income was 2.203 billion yuan, a year-on-year decrease of 33.01; the net profit attributable to shareholders of listed companies was -0.198 billion yuan, a year-on-year decrease of 109.78; the non-net profit attributable to shareholders of listed companies was -0.243 billion Yuan, a year-on-year decrease of 162.84.

In fact, the international business of BGI is still in its infancy. According to the company's report for the third quarter of 2023, BGI's gene sequencer business segment has achieved revenue growth in all regions, but from the perspective of revenue scale and contribution to the company, the strength at this stage, especially in the Americas, is minimal.

in the first three quarters of last year, in the gene sequencer business segment of Huada Zhizao, mainland China and Hong Kong, Macao and Taiwan achieved revenue of 1.083 billion yuan, up 21.19 percent over the same period last year; Asia Pacific region achieved revenue of 0.288 billion yuan, up 34.12 percent over the same period last year; Europe and Africa achieved revenue of 0.256 billion yuan, up 68.76 percent over the same period last year; and the Americas achieved revenue of 0.101 billion yuan, up 85.83 percent. In other words, the company's gene sequencer business revenue in the Americas accounted for less than 6% of the company's total revenue in this business segment, and less than 5% of the company's total revenue.

In terms of globalization, BGI will make key progress in 2022. In July of that year, Huada Zhizao announced that it had reached a settlement with the international sequencer manufacturer Inmena (Illumina) regarding all pending litigation in the United States. According to the terms of the agreement, the parties will no longer challenge the results of the litigation in the Northern District Court of California and the District Court of Delaware. Because Mina paid a net compensation fee of $0.325 billion to Complete Genomics, a subsidiary of Huada Zhizao.

then in August 2022, Huada Zhizao announced its official entry into the US market. Until January 2023, CG, a subsidiary of Huada Zhizao, announced that all sequencing products were on sale in the U.S. market.

It is worth noting that from a global perspective, the concentration of the gene sequencing industry is very high. International giants such as Illumina and Thermo Fisher are highly competitive and have long occupied a major or even all share in the market including China.

As a rising star, how does BGI get a share of the global market for gene sequencers dominated by traditional giants? Excluding other factors, this is a difficult problem in itself, and its internationalization journey faces many challenges. In recent years, the company has only increased its market share in China. According to previous data, the market share of new domestic gene sequencing equipment sales in recent years has steadily increased, from 12.6 percent in 2020 to about 39.0 percent in 2022.

Nearly two and a half months ago, in November 2023, CG announced plans to invest $3.2 million to build a manufacturing base in San Jose, California. According to the introduction at that time, the construction of the manufacturing base has started and is expected to be completed and put into operation in March 2024. This is also the second overseas manufacturing base of BGI after the construction of a manufacturing base in Latvia. BGI said the completion of the manufacturing base will further improve the U.S. supply chain, shorten product delivery cycles and more efficiently empower local U.S. users.